2022-12-09-KPMG_s_EU_Tax_Centre-Euro_Tax_Flash_from_KPMG_s_EU_Tax_Centre_8页_343kb

Summary of Euro Tax Flash: DAC8 Proposal (KPMG's EU Tax Centre)

Core Content

The European Commission (EC) has proposed amendments to the Directive on Administrative Cooperation (DAC), known as DAC8, aimed at enhancing tax transparency and combating tax evasion by extending the scope of automatic exchange of information (AEI) to include crypto-assets and cross-border tax rulings for high-net-worth individuals (HNWIs). The proposal also introduces a common system of minimum penalties for non-compliance with reporting and disclosure obligations.

Main Points of DAC8

1. Extension to Crypto-Assets

• Objective: Increase transparency in crypto-asset transactions and ensure tax authorities can assess whether income from such transactions is correctly declared.
• Scope: Applies to both EU-resident and third-country crypto-asset service providers.
• Key Elements:
  • Due diligence procedures for identifying reportable users (individuals or entities).
  • Reporting obligations for crypto-asset service providers, based on the OECD's Crypto-Asset Reporting Framework (CARF).
  • Exchange of information between Member States on reportable users.
  • Definitions: Based on the Markets in Crypto-Assets (MiCA) Regulation, excluding central bank digital currencies and electronic money.

2. Reportable Users

• Definition: EU-resident individuals or entities who are customers of reporting crypto-asset service providers.
• Special Cases:
  • Transactions involving companies listed on regulated stock exchanges and their related parties are carve-outs and not reportable.
  • Governmental entities, international organizations, and central banks are also excluded.
• Self-certification is required for both individuals and legal entities to confirm tax residence and other relevant details.

3. Reporting and Exchange of Information

• Timing: Reporting must occur by January 31 of the following calendar year.
• Location:
  • EU-based service providers report in their tax residence Member State.
  • Third-country providers regulated by MiCA report in the Member State where they are authorized.
  • Non-MiCA third-country providers may elect a single Member State for registration and reporting, unless an agreement exists with the user’s jurisdiction.
• Exchange Mechanism: Information is exchanged automatically, annually, via the EU common communication network using an XML schema.

4. Sanctions for Non-Compliance

• A minimum level of penalties is introduced for serious non-compliance.
• Penalties apply to both new and existing reporting requirements (e.g., DAC4, DAC6, DAC7).
• Serious non-compliance includes failure to report after two reminders or missing/inaccurate data exceeding 25% of the total.

5. Cross-Border Tax Rulings for HNWIs

• DAC8 expands AEI to include cross-border tax rulings for HNWIs with a minimum of EUR 1,000,000 in financial or investable wealth.
• Rulings issued, amended, or renewed after December 31, 2025 are subject to exchange.
• Rulings from January 1, 2020 to December 31, 2025 are exchanged if still valid on January 1, 2026.

6. Other Measures in DAC8

• Non-custodial dividend income is now included in the mandatory AEI.
• Member States cannot opt-out of receiving information on all income and capital categories starting from January 1, 2026.
• TIN (Tax Identification Number) must be reported for all income categories, with the Commission developing a tool to verify TINs.

Key Information

• Timeline: DAC8 is expected to apply from January 1, 2026, in line with the CARF.
• Public Consultation: Launched on December 8, 2022, with an eight-week feedback period.
• Legal Basis: Based on Article 115 and Article 113 of the TFEU, requiring unanimity for Council approval.
• Implementation: The proposal will be submitted to the European Parliament for consultation and will be adopted by the Council after review.

ETC Comment

• The DAC8 proposal is part of a series of amendments that have expanded the scope of reporting and AEI in the EU.
• It aims to close loopholes in tax rulings for HNWIs, as identified by the European Parliament and the European Court of Auditors.
• The common penalty system is intended to improve efficiency, but it may face challenges in achieving unanimous agreement among Member States.
• The European Parliament's opinion on DAC8 is non-binding but critical, especially given past criticisms of the Council on DAC7.

Next Steps

• The public consultation will run until the proposal is available in all EU languages.
• The EC will submit the proposal to the European Parliament for consultation.
• The Council will adopt the text once the Parliament and relevant Committees have provided their opinions.

Conclusion

DAC8 represents a significant step in the EU's efforts to enhance tax transparency, particularly in the context of crypto-assets and high-net-worth individuals. It introduces new reporting requirements, due diligence procedures, and a common penalty system, with implementation starting from 2026. The proposal is expected to be fully implemented by the end of 2023, pending stakeholder feedback and legislative approval.